Kohler Company’s Herb Kohler, Jr.

“I think there’s a significant business advantage in being privately held because you can persist when you know you’re right.” (Photo by Bill Bernstein)

Tuesday, January 29, 2013 - 9:30am

Herb Kohler, Jr., the chairman and CEO of Kohler Company, likes to make good use of every minute. So when he learned that he’d be flying out of White Plains, N.Y., on the day I wanted to interview him, he suggested that we meet at the airport and have our talk in the air, en route to Teterboro [N.J.] Airport. He dropped me off there before flying home to Wisconsin.

Kohler is the third-generation head of one of the oldest and largest privately held companies in the U.S., which his grandfather started in 1873 by buying an iron and steel foundry. His father took over in 1941, growing the business–which then specialized only in plumbing fixtures, engines and generators–to a book value of $300 million. In 1972, Herb Kohler, Jr. became chairman and CEO and added upscale furniture, tile and a hospitality component of four golf courses and two resort destinations: the American Club in Kohler, Wis., which the company built; and the Old Course Hotel in St. Andrews, Scotland, which it bought.

Under his leadership, the company has continued to prosper. Today it’s worth $5 billion and Herb Kohler is on Forbes’s list of the 400 wealthiest Americans.

One reason for his success may be that he works harder than anyone else in the company, which also employs his wife and three children. “None of us are my father, who is larger than life,” his daughter, Laura, once said. And, commented his wife Natalie, “He leads by example and is the first to admit that he doesn’t expect anything from those who report to him that he wouldn’t be willing to do himself.”

The 74-year-old Kohler, who has spent 51 years with the company, has received the Legend in Leadership Award from the Yale School of Management and was inducted into the U.S. Business Hall of Fame as a “legend of business.” When I asked him how it feels to be a legend, he chuckled and said, “I just try to do the job and keep things moving and growing.”

When you graduated from college, what did you want to do?

I wanted to go into business, but not with Kohler. One day, my father called me up and asked if I’d like a job with Kohler. I said, “You know, I worked there most of my summers and I see a lot of potential in the place, so there is one circumstance under which I will come back: if you promise that you will have nothing to do with my job assignment, my discipline or my promotions. And I am not to be treated as Herb’s son.” He promised, and I came.

Unfortunately, he died just a few years later. In 1968, when I was only 29, I became vice president of operations. I had to paddle like a duck–very calm on the surface, but underneath I was working pretty hard.

What was the scariest thing?

Just having that kind of responsibility. Two years later, I was elected executive VP and I was then responsible for marketing and sales along with engineering and manufacturing for all of the company’s products in kitchen and bath and engines and generators.

What was the best advice your father gave you?

We didn’t talk shop, so he didn’t give me any advice.

What do you think is your most significant achievement?

Growing the book value of this company for 40 years at a [average] compound rate of more than 10 percent a year.

Why do you think you’ve done better than the S&P 500’s average rate of less than 8 percent per year over the same period?

That’s the difference between public and private. I think there’s a significant business advantage in being privately held because you can persist when you know fundamentally that you’re right. Publicly held companies are seldom afforded the confidence that can drive through the quarterly analysis and quarterly reports.

What is the most important thing you have learned about business?

You just have to be able to strategically rely on people who can find the critical detail and solve tough problems. Business is dynamic; it’s always changing, and it can just as easily move down as move up if you’re not pushing the right buttons.

Why do you think you’ve been so successful?

I’m a risk taker, and that has allowed the business to grow. And I think I have as great an appreciation for the aesthetic as I do for the analysis. It’s sort of a right-brain, left-brain combination. Much of our business is fashion-oriented. The solutions I come up with are creative, not the expected. Sometimes they work and sometimes not, but at the end of the day the tally is certainly in my favor.

Leadership is what to you?

Leadership is trying to create some level of agreement on a specific direction by a diverse group of people who wouldn’t necessarily go there of their own will but they will follow if they have good leadership.

How important is trend-spotting at Kohler?

We’re always looking at trends. The housing markets are always moving in one direction or another, whether it’s homebuilding or remodeling, and seldom are [different parts of the industry] on the same trend-line. The policies in the U.S. have created a very unusual situation where both remodeling and new construction are at the bottom of their respective markets. People, for the most part, have witnessed the depreciation of their homes and no longer have the courage [to undertake] a kitchen or bathroom project because they don’t think it’s going to enhance the value. And new home construction obviously is affected by credit availability and also the ability of people to sell their existing homes. It was a very difficult set of circumstances. But now it’s begun to stabilize and, in some instances, reverse itself.

What is happening with Kohler in this economy?

We’re growing very modestly in this country, very rapidly in Asia. We have 10 plants in China, we’ve opened about one a year and most everything we make in China stays in China. We’re the leading name in kitchen and bath products in China, one

of five companies the Chinese government originally designated a famous brand.

What’s your favorite part of your job?

The creative part. Being able to live on the leading edge as a company. It’s a wonderful experience to do something better than anybody else or to do something that no one else has ever done, and that’s what we try to do. People ask what is my vision for the next five to 10 years, but I have no vision. We discover, and as we discover, we analyze and we create.

What have you done in the hospitality business to make your brand name recognizable?

We built our first golf course in 1988 as part of the American Club Resort hotel [in Kohler Wis.] By the year 2000, Golf magazine called us the No. 1 golf resort in America. We had four courses by then and they were all in the top 100. In 2004, we purchased the Old Course Hotel and refurbished and remodeled it, and redesigned four holes and replaced the bunkers and fairways of all the other holes. Today that course is the No. 1 golf club in Scotland, and the Old Course Hotel is considered the No. 1 golf resort in the world.

You seem to work 24/7. What do you do to relax?

I relax when I’m doing something intense–whether it’s challenging myself at whitewater rafting or battling an Atlantic salmon or doing something where I really have focus, like on a golf game. I’m an outdoorsman–a fisherman, a hunter–and I drive horses. Four horses at a time, like a stagecoach. This year, I’m doing it for fun, next year I’m doing it for competition.

What’s your newest business project?

We’re working on Hamilton Hall in St. Andrews [in Scotland], which started out in 1895 as the Grand Hotel and is right behind the 18th green of the Old Course. We’re going to open it next year with 26 apartments, a library devoted to the history of golf and an entertainment deck on top of the building where you can see four holes of the Old Course and look out to the North Sea. It’s going to be a remarkable place, and it’s just now going on the market.

Do you always travel by private jet?

Yes. They can take away my house, they can take away all my clothes, they can take away anything, but that jet is a remarkable enabler in terms of the experiences in which you can engage. It amplifies my usefulness and my time tenfold. If I was battling my way through commercial airports, I couldn’t do one-tenth of what I do now. Unfortunately, most politicians in this country just don’t understand that. They think of it as spending money to take life easy, but that’s as far from the truth as possible. It’s a remarkable tool.

Do you remember your first private jet experience?

In 1969, I bought a Piper Navajo. We were flying to a distributor in Reno. We left Wisconsin around 6 p.m. and we approached the Rockies as it was getting dark. The plane could go up to only about 12,000 feet, and the Rockies are up to 18,000 feet. We had to keep flying because we had an appointment early the next morning. Fortunately, we had a brilliant evening with a full moon and not a cloud in the sky. We wound our way through these snow-capped peaks 4,000 or 5,000 feet above. It was the most fabulous flying experience I’ve ever had.

What did you buy next?

My first jet was a Lear 24 that I bought in 1972. Now I have two Lear 45s, a Global Express XRS and a Gulfstream GIV-SP. The Lears are little workhorses, highly useful tools, and they’re flying every day somewhere around the U.S. The Gulfstream spends two thirds of its time somewhere in North America.

How big is your flight department?

We have a director, 10 pilots, two schedulers and four maintenance technicians.

What made you decide to buy the Global?

We needed the legs. It’s a very comfortable plane and very efficient. I think it’s the best plane of its size.

Any plans to upgrade or purchase more jets?

In four or five years, the plan is to buy an 8,000-nautical-mile Bombardier.

Kohler is a great Village to live in because of the generosity of the Kohler family and their commitment to the families who live here, to the Arts, Education and the general aesthetics of the Village.

Most genuine, honest, sincere person I have ever met. In the 8 years I have know him, he has treated me as a queen while always being a gentleman. His wife is beautiful and brilliant as well. I wil always wish him well and look for that Kohler tail at Midway.
Thanks Herb

As a former ten year alumnus of Kohler Co. I can assure you that the vast majority of former company associates consider HVK's company to be a great place you USED to work. There are lots of us former associates as the company has a 33% turnover rate in sales and marketing. The family pays poorly and treat their associates as surfs. I'm glad I worked at Kohler since it allowed me to learn how NOT to treat employees.

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